About Rates

Centrals banks, like the Federal Reserve in the US or the Bank of England in the UK, control a country’s supply of money and set the interest rates that apply when a bank lends to another bank, usually to meet mandates for how much each bank has to keep in reserve.
And for much of the past century, our economic system has worked something like this:
You earn money through your job. You deposit some of that money in your bank. The bank takes a portion and lends it out to customers and stores some of the rest at the Federal Reserve. If it has more at the Fed than is required by regulation, it lends the extra to other banks, which might not have enough in reserve. That’s called interbanking lending, and the interest rate we`re talking about when we talk about the Fed changing rates applies to that lending between banks overnight. This is actually the most important rate in the country. All other major interest rates are based on it, at least indirectly.
Changing this rate is a kind of lever that the Federal Reserve can pull to make things happen in the economy. If it wants to spur banks to lend, which should boost the economy, it lowers the rate. That eventually makes mortgages and car loans more affordable for consumers. If it wants to slow a raging economy, it raises interest rates.